Hong Kong Real Estate Giants’ First Half Boosted by Luxury Retail Growth
While office buildings remain vacant and luxury residential sales stalled, luxury shopping malls became a bright spot for major Hong Kong developers in the first half of 2023.
Leading commercial property developers were able to reap the benefit of China‘s post-pandemic offline retail resurgence and capitalize on a sustained appetite for luxury goods. And commercial landlords with higher exposure to those anchor luxury brands fared better than mass market players.
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“Three-star or four-star shopping malls can easily be replaced by e-commerce, but luxury goods won’t be easily replaced,” said Hang Lung Chairman Ronnie Chan during a recent interview with a local media outlet. “This is why I said long ago that only five-star shopping malls can really make some money.”
For the six months ended June 2023, revenue from Hang Lung’s luxury malls climbed 16 percent, the company said in a financial statement published earlier in August. Overall rental revenue from mainland businesses increased 13 percent, but overall revenue decreased 1 percent compared to the same period last year to 5.237 billion Hong Kong dollars, or $670 million, due to the depreciation of the renminbi.
Shanghai’s Plaza 66 and Grand Gateway 66 recorded 23 percent and 11 percent revenue growth, the highest among Hung Lung’s seven luxury malls in mainland China.
Plaza 66, one of the most prestigious luxury shopping malls in mainland China, recorded 891 million renminbi, or $123.6 million, in revenue for the first half of 2023. Excitement is brewing as a major unveiling of a four-story Dior boutique will officially happen at the luxury destination in November.
The company also singled out Center 66 in Wuxi as a strong driver of growth. Located at the heart of Wuxi, a tourist town known as the”Venice of the East,” revenue and tenant sales rose 16 percent and 24 percent, respectively, during the six-month period.
Hong Kong real estate giant Wharf Holdings reversed its $1.53 billion loss in 2022 as Hong Kong’s reopening brought back shoppers to its Harbour City and Times Square luxury shopping centers.
According to the company’s unaudited financial statement published on Monday, Wharf Holdings recorded a 1.78 billion Hong Kong dollar, or $227.9 million, profit for the first half of 2023. Revenue increased 4 percent to 6.47 billion Hong Kong dollars, or $827.8 million, supported by an uptick in hotel bookings.
At Harbour City, Hong Kong’s largest shopping mall, retail revenue increased by 9 percent and operating profit by 16 percent. At Times Square, located in the traffic-heavy Causeway Bay, retail revenue increased 6 percent while operating profit rose 12 percent.
Wharf Holdings said visitor arrivals at its Hong Kong malls only recovered 37 percent of pre-pandemic levels, while retail sales recovered to 85 percent of 2019 levels.
Upbeat outlooks are supported by Hong Kong’s steady recovery. According to Hong Kong’s Census and Statistics Department, an improved job market and consumption vouchers issued by the government resulted in a 18.9 percent in retail sales for the first half of 2023.
At Swire Properties, retail sales increased 41 percent at the company’s seven mainland China shopping malls in the first half of 2023, according to the company’s financial results released Thursday.
“In the Chinese mainland, foot traffic has improved significantly and retail sales have exceeded pre-pandemic levels for many of our malls, since pandemic-related restrictions were lifted,” said Tim Blackburn, chief executive officer of Swire Properties.
Retail sales at its Taikoo franchise, including Taikoo Li Sanlitun in Beijing, Sino-Ocean Taikoo Li Chengdu, Taikoo Hui in Guangzhou, HKRI Taikoo Hui and Taikoo Li Qiantan in Shanghai increased 29 percent, 27 percent, 16 percent, 72 percent and 169 percent, respectively, in the first six months ended June 30.
“In the Chinese mainland, our Taikoo Li and Taikoo Hui brands are recognized for providing quality experiences and innovative retail trends,” said Guy Bradley, chairman of Swire Properties. “We are moving forward with our expansion plans in tier-one and emerging tier-one cities.”
Taikoo Li Xi’an, which is a part of the historical city’s urban regeneration plan, will open in 2025. A new project in Sanya, China’s duty-free paradise, will be completed in phases from 2024.
To cement the group’s position as a leading luxury retailer in mainland China, Swire is upgrading Beijing’s Taikoo Li Sanlitun North to include stand-alone stores for Dior, Louis Vuitton and Hermès. By early next year, HKRI Taikoo Hui’s ongoing retail upgrade efforts will result in the opening of large-format stores for Louis Vuitton, Balenciaga, and Loewe.
Hongkong Land, the owner of Landmark, one of Hong Kong’s most prominent luxury malls, reported a loss of $333 million attributable to shareholders for the first six months of 2023, but the developer said improved performance from luxury retail, including luxury retail projects in Beijing and Macao, were able to offset lower contribution from the company’s Hong Kong office portfolio for the first half of 2022.
A relative latecomer to the mainland China luxury retail scene, Hongkong Land has plans to roll out an additional 10 retail projects in the next five years in seven mainland Chinese cities, including Chongqing, Chengdu, Wuhan, Shanghai, Nanjing, Hangzhou and Suzhou. The most high-profile project would be the $8 billion Shanghai West Bund Financial Hub.
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